Is business ready to account for natural capital?

13 October 2015

With increasing consumption, growing population and a seemingly unlimited appetite for economic growth across the globe, pressure on natural resources and the accompanying impact on the environment look set to increase at an alarming rate. Progressive companies are recognising their dependencies as well as their impacts upon this natural resource base, or ‘natural capital’. For example, food and agri-businesses rely on healthy soils, water availability and pollinators. By undermining just one of these elements, the risk of both productivity losses and price volatility rises.

It is therefore in the best interest of businesses to start including considerations of natural capital in their decision-making processes and to properly value the natural capital upon which they depend. This was recognised last week (8 October 2015) when, for the very first time, nature was placed in the stock market pages of the Times newspaper.

Of course the difficulty is actually how to go about measuring and valuing businesses’ impacts and dependencies on natural capital. The Natural Capital Coalition was created to address this pressing challenge by developing a standardised process for assessing businesses’ impacts and dependencies on natural capital by building on a number of tools, guides, methods and techniques that exist to measure and value natural capital. This new Natural Capital Protocol aims to transform the way business operates through understanding and incorporating their impacts and dependencies on natural capital.

The Protocol, currently still under development, aims to help business generate timely, trusted and actionable information around natural capital to inform decisions. It is intended to encourage businesses that may not have yet identified the benefits of valuing natural capital to get started and to empower businesses to take positive action for change. The development of the Protocol is a unique collaboration between members of the Coalition. The World Business Council for Sustainable Development (WCSBD) is leading a group in charge of the drafting process. The International Union for the Conservation of Nature (IUCN) is overseeing the engagement process. And the Cambridge Institute for Sustainability Leadership (CISL) has been tasked with testing the Protocol with an initial group of pilot businesses.

Ensuring the Protocol is relevant, practical and valuable to business users is indeed of vital importance. It is for this reason that today, over 40 leading businesses will be the first to see the new draft of the Natural Capital Protocol. This testing period is the first opportunity for business to live-test, refine and influence the Protocol. By running this testing programme CISL will enable a greater opportunity for businesses to contribute to the Protocol development and ensure the credibility and success of the final version in July 2016. It will provide tester businesses with the chance to share their learnings around natural capital and discuss issues with their peers. The feedback that CISL will collect will be crucial to help to inform the development of the Protocol before it is launched on 6 July 2016.

Of the 40 businesses piloting the Protocol, 10 are testing it in detail. For example, The Dow Chemical Company, the third-largest chemical company in the world, will be assessing water use opportunities and risks in site specific locations. The French luxury goods company Kering, owner of brands such as Gucci, Puma and Stella McCartney, is going to explore how to bring Natural Capital assessment results into their strategic business decisions. Hoffmann-La Roche, a pharmaceutical company, will investigate how natural capital assessments can potentially enhance the management and reporting of environmental issues. The other pilot testers cover a range of sectors and geographies and include household names such as the Coca-Cola Company, Hugo Boss, Natura, Nespresso, Nestlé, Olam International and Shell.

We may only be at the start of the pilot testing process but it is exciting to see so many businesses wanting to be involved. There will be opportunity to share initial findings at the World Forum on Natural Capital in Edinburgh at the end of November.

The involvement of these key business leaders from this early stage is essential to ensure the final Protocol becomes a commonly used product in the market and natural capital begins to make it onto the agenda of business decision-makers.

About the author

Gemma is Acting Director, Natural Resource Security Portfolio, bringing together influential companies with a global reach to address their dependencies and impacts on natural capital and enable companies to translate this into a tangible business context. With a Ph.D in Ecological Footprints, Gemma previously worked as the Lead Scientist at Global Footprint Network in Geneva.

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Articles on the blog written by employees of the University of Cambridge Institute for Sustainability Leadership (CISL) do not necessarily represent the views of, or endorsement by, the Instituteor the wider University of Cambridge.

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